In this article, we are going to take a look at small business funding options where you can look and hopefully find the cash you need to start up and to grow.
A Word About Risk and Reward
No matter which funding option, or combination of options, you choose, it is important to understand the concept of risk and reward.
Those who risk the most at the riskiest times, in your company expect and deserve to reap the greatest reward should the venture pay off.
You’ll need to be able to present a convincing risk and reward analysis to your investors, whether it’s a venture capitalist or your spouse!
Funding Options
Now that that’s out of the way, we can go forward with some ideas on how you can go about funding this small business idea that you have.
- Funding out of your own pocket.
This is probably the easiest form of money to obtain, since the only person risking is you.
It also means that you can probably expect to receive the greatest reward when your investment pays off. The problem is that you have to be working another job while growing your own small business.
Your options here depend on your assets; savings, an equity loan on your house, credit cards, and secondary income are all included.
- Family funding.
Many small business entrepreneurs will turn to friends and family when they are in need of financing. We have a couple of thoughts on this.
First of all, you are much more likely to receive the financing you need from these sources than others, because they are closer to you and believe in you.
However, you are more likely to regret the transaction should your business fail. You need to choose the people in your life whom you ask for start up money carefully; there needs to be a lot of trust and perhaps a lot of ability to forgive.
- Venture capital.
Well, this is an option for small business who have already had some success, but for the most part you won’t find a venture capitalist firm that will loan you money if you haven’t already invested about half a million yourself.
- Guaranteed loans.
This funding option is straight from your government (and you though those taxes would never work for you!).
Business is good for the government, and the crash of Silicon Valley is still haunting VC sources, so the government decided to set up loan programs to help small businesses in the start up and growth stages.
Talk to your bank and see what kind of programs they offer; basically, the government agency will repay the loan in the event of a default.
- Small Business Administration Programs.
Another government-run program which can be a real boon to small business entrepreneurs.
The SBA can be your best friend, so make sure to get familiar with it!
Finally, stock sales are an option for many small businesses, and they provide immediate funding. The ability to create a cash flow through sales of stock will depend on which stage your small business is at.
Money doesn’t grow on trees, but if you are willing to look hard enough you will probably find enough to fund your business.
Just remember that every gold miner needs the proper tools in order to be successful; in the case of your small business, your plan and objectives will be the key to a successful presentation.
